Are you thinking about starting the search for an optometry practice for sale?
Purchasing a practice is an incredible opportunity to earn more money, push yourself professionally, gain more freedom, make a difference in your community, and much more. With the United States’ aging population and increasing awareness of eye health, the optometry industry has grown steadily for the past five years, and this growth is projected to continue. With this in mind, there’s no time like the present to invest and get started.
An Introduction to Finding an Optometry Practice for Sale
Though certainly exciting, purchasing a new practice is a complex process with many factors involved and plenty of room for error. Therefore, it’s crucial that you do your research and thoroughly prepare for such a big and important investment. An essential part of this preparation is to consult with professional optometry advisors and peers in the industry, so you can avoid common pitfalls and ensure things go according to plan.
10 Crucial Mistakes to Avoid when Finding an Optometry Practice for Sale
Below are a few of the key mistakes people make when searching for and purchasing an optometry practice:
1. Not having a clear vision: If you are serious about purchasing an optometry practice you need to be prepared and have a clear, detailed vision of what you’re looking for. Otherwise, you’ll never be able to narrow down your search. Put down on paper where you are willing to live. Then ask yourself: What are you looking for in a practice? What are your drivers as a person — money, work-life balance, helping others, or something else? What kind of practice do you want? What size workload can you handle? Having clear answers to these questions will help guide your search and set the stage for your branding and business plan.
2. Waiting too long: Although there is typically a two year waiting period to qualify for financing after graduation, it’s never too early to start your practice search. Unlike real estate, there are very few good opportunities out there and finding the right practice takes time and patience.
3. Not having your finances in order: With tuition prices and the cost of living increasing each year, the average optometry student debt for many ODs can be more than $200,000. However, you may be pleasantly surprised to learn that significant student debt (on its own) will not usually prevent you from getting a loan. That being said, you do need to have other aspects of your finances in order. Banks tend to look for good credit scores (680 or above is typically desired), minimal credit card debt, personal tax returns showing high levels of income in recent years, production experience, and liquidity. Overall, if you are serious about buying a practice soon, you should be careful about your spending and save as much as possible. It’s usually best to hold off on buying a new car or home until after you’ve purchased your new practice. A broker can usually help guide you to a trusted, specialized lender.
4. Attempting to do it alone: The most fatal error you can make when looking to purchase an optometry practice is trying to handle the search, negotiations and/or appraisal all on your own. As an optometrist, you need to maximize your revenue by seeing as many patients as possible. You should not be spending your days searching and handling the administrative work all on your own.
5. Looking at unrepresented sellers: You should really only look at practices that are represented by a broker and have a thorough appraisal already done. That way, you won’t waste time and money vetting each and every opportunity. Buying a practice is a complex process with many variables that differ over time and are unique to each transaction, so having a team of experts at your disposal is essential.
6. Working with the wrong people: When it comes to choosing a consultant, lawyer or lender, you should be sure to partner with professionals that specialize in the field of optometry. Look for people with substantial, direct experience. For example, when hiring an attorney, you should choose one with specific optometric transaction law experience, not just any real estate attorney. Having the right people on board will help you avoid other catastrophic mistakes.
7. Not aiming high enough: Many people assume that when starting out in the field, they should buy a smaller practice with a smaller price tag. However, as counter-intuitive as it may seem, it’s usually best to aim big and purchase a larger, more expensive practice. The higher the price, the more profitable the practice. Buying a more expensive and larger practice will usually lead to a higher income and less risks down the line. You don’t want to make less than you can make working as an OD for another practice.
8. Relying on the wrong metrics: Don’t rely on simple, unreliable metrics, such as gross revenue. Do your due diligence. A thorough appraisal report should be around 100 pages at least. You need to take a wide range of factors into account, including but not limited to: gross revenue, industry standard margin or profitability, distribution of assets, when the last remodel was done, financial records for the last five years or more, staff interviews, patient base and demographics, and much more. When looking at a practice appraisal, the number one thing to pay attention to is the “owner discretionary income” or “owner cash flow” section, which captures the bottom line financials for the owner of the practice. This will provide a much more accurate assessment and full picture than the net income line stated on their taxes, or other simple metrics. This page of the valuation will help you develop a better understanding of the practice’s financial situation and whether it’s worth buying.
9. Not getting a second opinion: When the time comes to make an offer, it’s a good idea to hire a specialized optometry consultant to conduct a comprehensive second appraisal. Having a second opinion will ensure that the seller’s appraisal was accurate and give you the confidence you need to make a fully-informed decision.
10. Not acting quickly: With limited good opportunities out there, buying a practice can be highly competitive. In most cases, there will be more than one interested buyer. That’s why you need to act quickly if you are truly interested and have site visits and due diligence completed in a timely manner. It can take years to find the perfect fit, so if you think you’ve found it, act fast or you could miss out!
Key Considerations Before Purchasing an Optometry Practice
Below are a few more things to consider when looking to purchase an optometry practice:
- First and foremost, before starting your search, you should carefully consider whether it’s best to start an optometry practice cold (from the ground up) or buy into an existing practice. There are pros and cons to each of these options, so be sure to consider both paths to running your own practice.
- You should also consider whether it’s best to do a complete or partial practice purchase. For more information on these options, check out our guide to starting your own optometry practice.
- If you’re sure about purchasing a practice, ask yourself whether this is the right time for you personally. Are your finances in order? Do you have enough experience to take on the responsibility of running your own practice and leading a team? Don’t bite off more than you can chew!
- Also, you should consider more generally whether it is a good time to buy. Take external factors, such as interest rates and the state of the industry, into account when deciding to take the plunge and start your search.
There is, of course, much more to consider. As mentioned above, working with a team will help ensure you take everything into consideration, so that you can make a fully-informed decision.
Resources Available to Help in the Process
Optometry consulting is an incredible resource which will help guide you through the process of searching for and purchasing your own practice. Plus, it’s a gift that keeps on giving once you own and start running the practice. It’s best to consult with highly-specialized and experienced professionals — such as optometry business and financial advisors, optometry billing and coding advisors or optometry practice operations advisors — who can provide more specific advice and insight than general business advisors.
An optometry consultant can help you with the following services, just to name a few:
- Practice valuation;
- Overall practice assessment;
- Profit and loss analysis;
- Review of key performance indicators;
- Business plan;
- Staffing analysis;
- Billing and coding support;
- HR support;
- And much more!
Additionally, peer-to-peer advice is a great resource when starting out in the field of optometry. Joining a professional optometry network can provide you countless opportunities to connect with and learn from others in the industry.
Recap of Mistakes to Avoid When Searching for an Optometry Practice for Sale
As you can see, there are many mistakes to avoid when searching for an optometry practice for sale. The most important takeaway is that you don’t have to go at it alone; On the contrary, you should assemble a team of experienced, specialized professionals to guide and support you throughout the process.
Whether starting a new optometry practice from the ground up or buying into an existing practice, joining a professional optometry network like PECAA will give you access to all the tools and support you need in order to be successful.
“I joined PECAA pretty much as soon as I decided to open my own practice. My PECAA membership proved immediately beneficial in many areas. An area that was invaluable was when I was applying for a bank loan. Bryan was able to help me polish up my financial goals and projections before presenting myself to our local bank to ask for a loan. Needless to say, we got it! Bryan also provided me an excel spreadsheet which gave me an idea of how many of each ‘type’ of frame I should aim for (women’s vs. men’s, high vs. low price, etc). These are just a few examples of the ways PECAA has helped, I could go on and on!” -Dr. Meg Richardson, PECAA Member
To take advantage of all these resources and more, join PECAA today!